1. THE WORLD ECONOMY EXCHANGES, CAPTIALISM, COLONIALISM, AND EMPIRE BUILDING

2. ORIGINS OF EUROPEAN TRADE ► European intermediaries  Comparative Advantage ► Country can do many things but it will excel in some over others ► Countries develop trade based on comparative advantage  Advantage is based on where the nation has greatest advantage  Concentrate economic resources in that area ► European advantage was to act as middle men and shipping for others  Absolute Advantage ► One country has natural advantage in producing certain goods, services ► Absolute advantage is often a natural monopoly ► Asians produced spices, goods, which Europeans could not ► Europeans began by trading with silver, gold  European establish monopolies ► Europeans establish chock points at areas where all trade had to pass ► Seized lands where spices grown, destroy competition, create monopoly ► Transoceanic trade  European merchants created global trading system  Based on supply and demand; linked ports of the world ► Manila galleons  Heavily armed ships sailed between Manila, Mexico  Asian luxury goods to Mexico; Silver from Mexico to China  East Asia became dependent on American silver

3. WORLD TRADE ► Terms of Trade  Agreements on what will be exchanged  Agreements on payments, amounts to be exchanged  Bilateral is when two nations negotiate equally ► Europeans had to negotiate with China, Japan, Muslims, Russia (too powerful) ► Only allowed to trade though one port  Canton (Guangzou) in China  Nagasaki in Japan  Unilateral is when one nation dictates terms of trade ► Composition of Trade  Europe and Trade ► Europeans traded finished goods, especially manufactured( Guns, cloths) ► Europeans purchased unfinished goods to trade (Silver, sugar) ► Europeans sought luxuries, spices, slaves, gems, silks, porcelain  World and Trade ► Low-cost goods: gold, silver; sugar, spice, tobacco, cotton; slaves ► Africa, Latin America became one commodity exporters ► E. Europe sold commodities through W. Europe (grains, timber, tar, fish) ► E. Asia, S. Asia, S.E. Asia, S.W. Asia: balanced agreements of trade ► Balance of Trade  Amount to the profit or loss involved in trade  Europeans had an enormous surplus or positive balance of trade

4. INTERNATIONAL INEQUALITIES ► International Inequality  Center or Core of world trade was Western Europe ► Most of world in an unequal relationship to Europe ► Most countries did not control own economies  Local trading elites often grew rich trading ► Worked with Western Europeans on seas, coasts ► Controlled their own interior economies  Most of locals not involved in world economy ► Population existed at subsistence level ► Contacts limited to coasts, ports ► Coercive Labor  Most of world labor was unfree  Slavery differed little from serfdom, caste slavery, peasants  Profits often depended on keeping labor cheap  Europeans often established plantations with cheap labor

5. WAS THERE A WORLD ECONOMY, c. 1600? ► Yes  Western Europe ► European Atlantic Seaboard ► Colonial possessions in North America, South America  Poland and Russia  Coasts of West, East Africa  Coasts of India, S.E. Asia, E. Asia  Muslim S.W. Asia ► No  European areas of Ottoman Empire  Interior of Africa  Interior (steppes, deserts) of Eurasia  Interior of South Asia  Indochina  Australia and New Zealand  Interior of North and South America  Pacific islands of Micronesia, Polynesia, Melanesia

6. EAST ASIA ► Benefited from global trade  Allowed Limited Contacts ► Strong government disincentives to trade ► Used Chinese navy to keep pirates, Europeans out ► Tended towards official isolation ► Japan, Korea equally apprehensive  Chinese manufacturing better than Europeans ► Tended towards luxury goods ► Chinese demanded silver in payment  Not active participants on scale of Europe ► China failed to appreciate European threat  Neo-Confucianism clouded understanding  Technology considered beneath Chinese  Profits, trade considered inferior occupations ► Japan understood impact of Europeans  Most troubled by European firearms as un-samurai  Eventually limited trade to one yearly ship at Nagasaki  Officially closed Japan until 1854

7. OTHER PARTS OF WORLD ► Muslim World: Mughal India, Ottomans, Safavids  Interested in trade, cooperated to a degree  Allowed small port colonies to arise  External trade often handled by ethnic minorities  Exchanged goods for silver, luxuries, processed goods  Eventually became dependent on European manufactured goods  Internal expansion, development over external trade ► Russia  Agricultural economy  More concerned with steppe nomads, internal problems  Not involved until 18 th century ► Africa  Except for coasts, Cape Colony generally outside world economy  Diseases, climate kept Europeans out of Africa  Contacts limited to coastal states